SpartanNash Co (SPTN) 2010 Q2 法說會逐字稿

Greetings, and welcome to the Spartan Stores, Inc., fiscal 2010 second quarter earnings conference call. At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

Ladies and gentlemen, I must remind you that comments made by management during today's call will contain forward-looking statements. These forward-looking statements discuss plans, expectations, estimations, and rejections that involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Internal and external factors that might cause such a difference include, among others, competitive pressures among food retail distribution companies, the uncertainties inherent in implementing strategic plans, and general economic and market conditions.

Additional information about risk factors and the uncertainties associated with our forward-looking statements can be found in the company's earnings announcement, annual report on Form 10-K, and the company's other filings with the SEC. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. Spartan Stores disclaims any intention or obligation to update or revise any forward-looking statements.

It is now my pleasure to introduce your host, Mr. Dennis Eidson, President and CEO for Spartan Stores, Inc. Thank you Mr. Edison. You may begin.

Good morning everyone, and thank you for joining our fiscal 2010 second quarter earnings conference call. With me this morning are members of our team including Executive Vice President and CFO Dave Staples, Executive Vice President of Merchandising and Marketing Alan Hartline, Executive Vice President of Retail Operations Ted Adornato, Executive Vice President of Wholesale Operations Derek Jones, and the Executive Vice President and General Counsel Alex DeYonker.

This morning I will provide you with a broad overview of our quarterly financial results and business progress. Dave will then provide a more detailed review of our second quarter financial results as well as our financial outlook for the remainder of the fiscal year. I will then provide some concluding remarks about our ongoing business plans.

I want to begin by saying that we are pleased to be able to maintain a strong level of operating profits and EBITDA by historical standards, despite the continuing economic recession. Consumers continue to be apprehensive about the economy due to rising unemployment, which is now 15.3% in Michigan. And competition for market share among retailers remains intense. In addition, as mentioned in our press announcement and by other grocery retailers, we experienced significant product price deflation in a number of high-volume categories, namely, meat, produce and dairy. On a year-to-date basis we generated cash from operations of nearly $41 million and EBITDA of $55 million.

Within this challenging environment, our solid financial results and healthy balance sheet will continue to serve as a strong foundation for the execution of our long-term growth strategy. I firmly believe that our ability to maintain this solid performance is a direct result of our business strategy, execution capabilities and the dedication, skills and hard work of the management team and all of our associates. They are simply doing great work and making exceptional contributions toward our success during this extremely challenging time. I want to personally thank all of them for their efforts.

As pointed out during our last conference call, we expected the macroeconomic conditions, competitive environment, and unseasonably cool summer weather in our tourism-oriented markets to increasingly influence our core retail and distribution sales performance as the year progressed. Although that trend was evident in our second quarter sales results, I do want to point out that the majority of our comparable store sales change from last year related to higher product price deflation and the competitive openings in the first and second quarters. The unseasonably cool weather and comparison to the more than 4% increase in last year's comp store sales also contributed to these results. I would like to highlight that we will have up to two more quarters of challenging comparisons to the prior year's results and that the other factors should cycle during the next 12 months.

These macroeconomic factors, industry conditions, and consumer trends are having a similar effect on the performance of our distribution customers' stores. We continue to work diligently with these customers through our value-added private label programs, marketing and merchandising initiatives, and other support services to help improve their sales performance while driving down product costs so that we both remain strong competitors, profitable and relevant to today's consumer. On a year-to-date basis we have had a net gain in distribution customers, and we continue to believe that there are solid opportunities to expand sales with existing customers and to attract new customers.

We also made additional progress this quarter improving inventory and overall working capital management. During the quarter we continued to make progress with our value-related initiatives, private label program, and capital improvements. Most recently we implemented a customer loyalty program at our Glen's retail stores, and customer acceptance and registration for the program has been very good. By the end of our second quarter, a high percentages of sales at these stores were being made on the customer reward card. We are pleased with the early results of the program and believe that the program will bolster our future sales performance while providing consumers with even greater values and loyalty rewards.

We also experienced meaningful increases in our prescription counts due to our successful pharmacy discount program, which is important as pharmacy customers tend to be amongst our most loyal.

Additionally, with 14 fuel centers located in the Grand Rapids area, we now have more complete market coverage and have been able to implement market-wide fuel promotions for the very first time.

Our private label sales penetration continued to improve during the quarter, and we firmly believe that the program has even more room to grow. Based on item scans at the store level, our private label sales penetration reached 24.2% during the second quarter, compared to 22.7% in fiscal 2009.

Collectively we believe that these programs are continuing to improve the value that we offer consumer as the economy begins to stabilize.

We remain pleased with the execution of our capital investment program. During the quarter we completed a store relocation project, opened two more fuel centers, and substantially finished our major remodel project. We have now grown our fuel center base at 23 since starting this initiative in 2004. In addition to these projects, we continually strive to optimize the performance of our store network by assessing the performance and long-term potential of each individual store. As such, we closed one store during the second quarter, bringing our store base total to 97.

With that overview, I'll now turn the call over to Dave.

Thank you Dennis, and good morning everyone. I will now provide some additional details about our second quarter financial results and review our outlook for the remainder of fiscal 2010.

Consolidated net sales for the 12 week second quarter were $610.2 million compared with $626.8 million in the year-ago quarter. Our sales trends were adversely affected by significant product price deflation in the high-volume categories previously mentioned, materially lower retail fuel prices, a higher mix of private label sales, the weak economic environment, and unseasonably cool weather.

However, gross margin for the second quarter increased 200 basis points to 22.3% from 20.3% in last year's quarter. The improvement was due mainly to the higher mix of retail sales, which represented approximately 59% of consolidated sales compared with 52% in last year's second quarter.

Operating expenses were 18.8% of net sales compared with 16.7% of sales in the same period last year. The rate increase was due primarily to the higher operating cost structure related to the increased mix of retail sales and lower sales volumes.

Second quarter operating earnings of $21 million compared with $22.5 million last year. EBITDA for the quarter was 4.9% of net sales compared with 5.0% in the same period last year. Earnings from continuing operations, which included higher interest expense related to the additional borrowings for our most recent retail acquisition, were $10.5 million or $0.47 per diluted share compared with $11.6 million or $0.52 per diluted share last year.

Net earnings for the second quarter were $10.4 million or $0.46 per diluted share compared with $10.6 million or $0.48 per diluted share in last year's first quarter. Last year's second quarter net earnings included a loss from discontinued operations of $1 million, or $0.04 per diluted share, which related to the exit of our Pharm operations.

Turning to our business segments, second quarter distribution sales were $250.0 million compared with $303.3 million in the same period last year. The sales decline was due primarily to the reclassification of $33.3 million in sales for the acquired VG's stores, product price deflation, and the weak economic environment. We estimate that approximately 2% of the distribution sales decline related to product price inflation.

Distribution operating earnings, however, improved for the 16th consecutive quarter to $10.6 million from $10.0 million in the same period last year. The improvement was due primarily to an improved sales mix of high margin products, lower employee incentive compensation and benefit costs, and tighter control of general operating expenses. Lower inflation related procurement gains, however, were more than offset -- more than offset the benefit from a change to a $100,000 LIFO inventory valuation credit this year compared to an expense of $800,000 last year.

Second quarter retail sales increased 11.3% to $360.2 million from $323.5 million in the same period last year. The sales increase was due to the incremental sales contribution from our acquired stores but was partially offset by a 5.1% lower comparable store sales, a $9.3 million decline in fuel sales due to significantly lower retail pump prices, $4.9 million in sales loss due to two stores that were closed and one that was sold since last year's second quarter.

The decline in comparable store sales was due primarily to significant product price deflation in the meat, produce and dairy categories, competitive store openings, and the unseasonably cool weather during the quarter. We estimate the product price deflation in the previously mentioned categories impacted comparable store sales by approximately 200 basis points. In addition we believe that competitive openings contributed approximately 200 basis points of the decline, and the increase in private label sales contributed approximately 40 basis points to the trend. Absent these factors, our comparable store sales decline was relatively modest.

Second quarter operating earnings were $10.4 million compared with $12.5 million in the same period last year. The operating earnings decline was due to lower sales volumes, incremental expenses related to the acquired stores, and lower retail fuel margins. Retail operating earnings also benefited from a lower LIFO inventory charge of $100,000 in this year's second quarter compared with a $400,000 charge in the same period last year.

We continued to maintain a strong balance sheet and capital position as well as solid and stable cash flow. Total long-term debt, including current maturities and capital lease obligations, declined to $193.0 million from $195.8 million at the end of the first quarter. I wanted to point out that the outstanding debt balance declined even though we entered into two capital leases during the quarter totaling $7.6 million as a result of our store improvement program.

Year-to-date net cash generated from operating activities increased by 75.1% to $40.9 million due to better inventory leverage and working capital management. Our balance sheet remained healthy with a strong -- with a long-term debt to capital ratio of approximately 0.42 to 1.00 and a debt to EBITDA ratio based on trailing four quarters EBITDA of 1.8 to 1.0. We also have approximately $120 million of borrowing availability under our existing credit facility.

I will now cover our outlook for the remainder of fiscal 2010. We continue to expect retail comparable store sales excluding fuel to decline in the low to mid single digits for the remainder of fiscal 2010 due to the issues already discussed and the cycling of strong comparable store sales growth that we reported in the third quarter last year.

In the distribution segment, excluding the reclassification of approximately $44.2 million in sales for the acquired VG's stores for the remainder of the year, we expect sales to decline relative to last year by an amount similar to that of the retail segment.

These factors, as well as the anticipated lower fuel margins relative to last year's third quarter, will cause additional pressure on earnings. We estimate that the fuel margin's affect on earnings will be approximately $0.03 per share in the third quarter compared with a $0.01 per share effect that occurred in our second quarter.

As Dennis previously mentioned, we continue to make progress on the capital investment front. In addition to the projects he mentioned, we began construction on a new D&W store that is scheduled to open in mid fiscal 2011, and we are likely to complete two transactions in the third quarter that will result in store relocation projects for the second half of fiscal 2011 and 2012. Following the completion of these two stores relocation projects, we will be substantially complete with our major Felpausch store initiatives.

We also expect to open two additional fuel centers and close a net of two stores locations during the third quarter. Store opening, remodel and divestiture costs related to our capital programs are expected to exceed last year's expenses by approximately $800,000 for the third quarter.

Total capital expenditures for fiscal 2010 are expected to range from $48 million to $52 million with depreciation and amortization expense ranging from $34 million to $36 million and total interest expense, including the implicit noncash interest costs related our convertible notes, of approximately $15.5 million to $16.5 million.

I will now turn the call back to Dennis for his closing remarks.

Thanks Dave. Again, we are certainly pleased to report a solid financial performance, good cash flow and a healthy balance sheet and to have excess liquidity, particularly in the context of the weak economic climate, inflationary product pricing and the competitive environment. We are firmly committed to bringing customers good value, particularly during this challenging economic period.

As previously mentioned, we are pleased with our consumer value propositions, which includes our "more ways to save" campaign that encompasses fuel, pharmacy, promotional pricing, private label and Meals Made Easy. Additionally, we announced the launch of two new value added retail programs including a major nutritional guide program and our Michigan's Best campaign. Both of these programs are relevant to today's consumers, and early feedback has been positive.

In the near term we expect the economy to remain soft. The competitive environment is likely to remain at a heightened level as additional supercenters are expected to open in a few of our markets during the third quarter. We do, however, expect relief from the competitive pressure as we begin to cycle these new store openings beginning in fiscal 2011's the first quarter.

As we work through this challenging period, we will continue to focus on the controllable factors of our business including providing customers with good values by implementing creative retail programs that help stretch their dollars, seeking opportunities to expand our distribution business to both new and existing customers, making strategic capital investments to further improve our store base, working on operational efficiency improvements, and continuing to strengthen our balance sheet.

Again, I want to conclude my remarks by personally thanking all of our hard working managers and associates for their efforts during these challenging times. It is their direct contributions that make a real and significant difference with our customers and to our overall performance.

We will now open the call for your questions.

(Operator Instructions). Bakley Smith, Jefferies & Co.

Just a few quick ones here. I wanted to talk about -- if you could put a little color on this. It seems like you guys are doing a lot of work on the cost saving side, and I wanted to see if we could get a little more color on what you're doing there and how sustainable it is if we do see sales kind of tick up a little bit in this, especially as we move into your fiscal 2011.

I'm going to let Dave respond to that.

I think we talked initially as we moved into the year about some of the things we were doing on the associate side with reduced bonus plans and the freeze of the 401(k) match. Certainly it's a foundation of what we are doing, but it's really bigger than that. We really focus on our non-product areas, supplies and other items, working hard to lower those costs, continuing to work on the cost of construction and other things like that. So it's really a -- it's across the board focus on efficiency and cost reduction throughout the business. I think the benefit related type costs, as the economy improves and our performance improves, those will come back. The other costs we expect to hold onto.

Great. And I wanted to ask about financial health of your distribution customers. Is there any -- I know obviously you're not going to speak specifics, but -- speak to specifics, but how do you feel generally as you look at -- everyone knows at this point that the region and the space has been pretty beaten up here. Does anybody -- are there any groups of customers (multiple speakers)

Bakley, are you still there?

Yes, absolutely (multiple speakers) hello?

Okay.

Did you guys get my question there?

Yes. I think we did. I would say that our customer base has been particularly resilient. If you were to go back in time and look at the number of wholesalers that had a share of this marketplace and their customer base, you would find that that's where the attrition has really been.

Spartan has managed I think to always have the best independent retailers affiliated with them, and I think our programs have allowed our customers actually to win in many of those markets where the competitive set was another independent retailer. So frankly, we have been heartened by the performance of our independents. And hopefully our contributions to their performance is part of the reason, but they are entrepreneurs and they know how to slug through it.

Okay. Great. Thanks very much.

Chuck Cerankosky, Northcoast Research.

Good morning everyone. If you were to -- looking at this market that you're competing in, do you feel it's a shrinking pie at this time?

I think it's probably somewhat shrinking at the moment. It's kind of hard to get your arms around all of those numbers, but the population here is certainly not growing. It's kind of hard to get that real-time, but there's been some modest population decline. And I think partially we are seeing a little bit of reduction in units I think as customers cut back, and the -- just the overall environment today with 15.3% unemployment. Last year at this time it was 8.7%. I mean, it's a 6.6% delta. If you look at the national averages, even though the unemployment is up to 9.8% I think, it's only a 3.6% increase over prior year. There's a bit of that turtling up still going on, so I think the pie is shrinking a bit.

All right. That certainly makes sense. You gave some nice quantification of some of the impacts to the comps, the 200 basis points from deflation. How would you quantify the weather? -- which is a tougher call, but it is important to Glen's.

It is a tougher call. I don't know if I can really give you a quantified answer to that. Living here in Michigan my whole life and kind of understanding the -- quote, unquote -- up-north thing, right, where you get this line of traffic that goes for metro Detroit to northern Michigan on Friday afternoon that is bumper to bumper, it's a phenomena that occurs, but if the weather forecast up north isn't good on the weekend, it just diminishes significantly. So I think with the weather and the economic climate together I would characterize it as a very meaningful reduction in traffic up north.

Okay. Tough to say, but it hurts?

Yes sir.

Now, when you are looking at the data or looking at what customers are buying as you walk the stores, what can you say about the sales mix that has you concerned or heartened or just the reality of what's going on?

I think it's -- I think we are not heartened per se. I think it's the reality of the situation that the consumers' buying habits have changed. Clearly we called out the private label numbers, and we are pleased with that. Our penetration continues to go up. Not only were we 1.6% ahead of the performance we had last year, but we are actually 1.8% on penetration ahead of the national average. So we continue to see that.

If you look at the whole marketplace, I think a theme that we are feeling is there is a bit more back to basics in what consumers are purchasing. There are some categories that in the market are running double digit ahead in units, and they feel very basic, like coffee, shortening and oil, butter, packaged meals, baking mixes, eggs. I mean, if you get the theme around those, they are virtually all double-digit lifts. So I think that's a common theme.

And of course our entry-level private-label program, Valu Time, continues to grow, and actually units in Valu Time were up nearly 25% in the second quarter, again, I think an indication the consumer is really looking to optimize her spend.

Say, give me that number again in Valu Time? It was up how much?

25%.

Wow. And also just to check, you said the private label sales penetration was 24.2 versus 22.7?

Yes.

I wanted to make sure I got that right. The Glen's loyalty program, it's -- you guys sound pretty happy the way it's progressed. How about bringing it south to your other banners?

We've characterized that as a test, but certainly nothing that has occurred so far in our tests would suggest that we wouldn't roll that out. We haven't made the final determination or a timeline, but we are encouraged, we've done some focus group work up there. Post the launch we've gotten high marks from consumers. We continue to sign up up to 3,000 new consumers every week, even 14 weeks into the program. 90% of the sales on the card, a way to reach the consumer electronically now with the information that we've generated.

All things are going pretty much as planned. I would honestly tell you I wish that there was less noise in the marketplace in northern Michigan as it relates -- related to tourism, the weather, etc. But we are feeling pretty good.

Got you. A lot of economic noise right now.

Yes.

Now, when you're looking at the market, you mentioned the supercenters opening. Do you see any competitive store closures? And how about any additional pressure from limited assortment operators in your market? And then also, can you talk about how VG's has performed thus far?

On the -- I don't think we have any imminent -- Dave, you help me if I don't have this right -- store closures that we know of that have -- are on the horizon or that have recently occurred. I think people are kind of hanging in there. And Chuck, we haven't historically gotten into banner results. I would just suggest to you on the basis of geography, if the state of Michigan is running a 15.3% unemployment, metro Detroit is in excess of 17%, and the going is tough on that side of the state as well.

How about some of the limited assortment stores expanding where you operate retail? I'm thinking of all these Save-A-Lot's.

I don't have a number off the top of my head. I think there has been a nominal amount of limited assortment expansion. It has not been significant.

All right, thank you very much.

Ajay Jain, Hapoalim Securities.

Good morning. In relation to VG's, can you just talk briefly about where things stand with the integration process and whether or not you're experiencing any dilution so far this year?

Where it stands, I think, with integration -- we continue to be on track with what we'd expected from a systems perspective and a process perspective. I think, as Dennis alluded to, we don't go into the specifics on individual banners, but it certainly is a tougher area of the state that that operates in. Our believe, though, is it's a kind of quality of store base and a quality of operation, and it's -- in the long term it's going to fulfill what we expected to fulfill. But it will certainly be more challenging maybe than expectations initially.

So based on your year-end assessment that it would be slightly accretive this year, after taking into account the integration costs, do you still expect it to be slightly accretive, or --?

No. It will be probably be slightly dilutive, but slightly.

Just shifting gears in terms of competitive activity, I know you have some new supercenters popping up in Michigan. Can you comment on whether those competitive store openings are having any real impact on your foot traffic based on what you're seeing?

I think as you look at it, certainly when a new store opens up next to a store, it's going to impact foot traffic. I think that's just a given. So I guess, yes, when a new store opens next an existing store, you'll see some foot traffic impasse.

In the case of Wal-Mart in particular, apart from the foot traffic aspect, do you think they have been a lot more aggressive across the board on price rollbacks? In your markets has there been any significant trend that you can speak to?

No, we don't necessarily see that. I think in our western Michigan market we actually -- when you take out the competitive opening or so, I think we actually feel good about our transaction counts. So I guess I would answer no to that.

Okay, thank you very much.

Karen Short, BMO Capital Markets.

So a couple things, and I'm sorry, I missed some of your call, so I apologize if you went over this. But did you give any comments on what you were seeing in terms of deflation maybe bottoming or trends in deflation?

Then I kind of want to go along that line when I know your answer.

We did not comment on that, Karen, and I wish we had that crystal ball. There are some that believe maybe by the end of the calendar year the dairy thing may mitigate a bit. But we are still feeling the produce deflation pretty significantly. Same thing with proteins and meat. So we don't see a lot of light at the end of the tunnel -- in the very near term, for sure.

And then I guess, can you maybe talk a little bit about the cadence of sales throughout the quarter, and then maybe if you have any comments on if there's been any change into the third quarter?

Yes. You know, the tourism stores were pretty tough with the traffic being lighter and the weather being cooler all through the quarter. And I would say that as we've gotten into the third quarter, we're four weeks in, we haven't seen an appreciable change in the numerics.

Okay. And so maybe if I could just think about the third quarter here, maybe did you give the competitive update -- or competitive openings that you expect in the third and fourth quarter? (multiple speakers) versus -- so I need you to indicate what you saw in the second.

We said that we were going to have some more. I think in our -- if we think about it from a core comp retail store marketplace, if you're trying to model that, I think we have one supercenter coming in Q3 in a core retail market for us. We have some in some non-comp markets, and we have some in our distribution base. But clearly the pace of the supercenter activity is beginning to moderate. As we said, in the first part of fiscal '11 we will begin to cycle out of -- begin to cycle out of the heavy traffic there.

So if I had to think about the third quarter, just to paraphrase -- and tell me if I'm saying this right, you're basically -- you haven't really seen an improvement in trends as it relates to sales, like I'm assuming probably EBITDA, but you also have an additional 0.8 million that we have to consider from an integration cost perspective. Is that fair?

Yes.

Okay. And I guess what I wanted to also kind out is, with this deflation you're obviously seeing strong tonnage. I guess, what do you think the customer will do if we start seeing a return to inflation? Is there a risk that that tonnage -- it should help your comp, and then you probably lose the tonnage, maybe. Do you have some comments on that?

I think it depends on how it comes. I don't think there's anybody forecasting that we're going to end up going from a significant deflationary cycle to a significant inflationary cycle. So I believe that becomes a little bit more of an evolution into an inflationary mode. So I don't think the pushback will be that significant from the consumer, because I don't think it will be a jolt. That's my own personal view.

However, I would say to you that it almost feels at times, that consumer has that X amount of dollars in their wallet, and that's what they're going to spend. We kind of struggle with that here from time to time. So to the extent that is true, it could get some pullback. But I'm not expecting it to be any kind of a significant change in tonnage.

And any updates or comments on how things are going in distribution from an expansion into adjacent states prospective? I know that's obviously an area of focus.

It is clearly an area of focus, and I will tell you we have a lot of attention being devoted to those markets. And we are working hard.

Great. Thanks very much.

(Operator Instructions). Ben Mackovak, Rivanna Capital.

Thanks for taking my question. So if we look year-over-year and we want to see what has impacted sales versus the huge rise in unemployment that you talked about versus price deflation, how would you break that down as to which -- what type of impact did those two variables have?

The price deflation on the retail side, we kind of called that out for you at about 2%. If you look at the wholesale side of our business, that price deflation might even be a little bit bigger than that at wholesale. So that one is easy to quantify.

To be honest, I don't know how we get to the answer on how much of this unemployment is driving the negative sales. I would just say to you that I think it's not only the employment but it's also the confidence the consumer has, or in this case doesn't have. It's a difficult environment here, and I think consumers still aren't sure that all of the worst is behind them.

And it feels to me like we are continuing to bump along the bottom of this at the moment, and not -- again, I would say not an appreciable change to shopping behavior. And until we get employment going in the right direction and some confidence back to the consumer, I think we're going to live in this kind of -- this range here for a bit.

And can you remind us how many fuel centers you currently have?

We currently have 23.

Is there a goal as to how many you could ultimately get to?

No, we don't have a solid goal. We actually are mindful of making sure that where we put a fuel center is relevant to the marketplace and that there is room in the space for a competitive fuel center, the size of store, the volume that the store does. Our model on fuel centers, frankly, is generally a breakeven model for the fuel center, and the return comes from incremental comp store sales. So -- but we think on a go-forward, I think three, four, five a year could continue to be the range that we would add.

Thank you very much.

(Operator Instructions). Chuck Cerankosky, Northcoast Research.

Thank you. Dennis, I have a follow-up. Could you talk about prepared foods trends, how customers were reacting to your offerings in those categories.

Prepared foods is an area I think we can do better. But we are performing better than we have historically in the category. We have a central kitchen that prepares some of that product for us, and those products -- and we've launched some new products in the last six months. They are doing great. If you were to look at our HMR offer and bounce it off Nielsen, we are up around 20%, dollars, versus a year ago. But I would say it's on a low base, but there is something there, and I think we continue to mine that, and I think there's much more upside there, Chuck.

Now, are you seeing customers trade into the category as a result of moving away from restaurants? Or are they -- or do you feel they're -- you have to be careful what you add and that they're going to buy the lower price points within it? Is it -- do you see evidence of trading down within it right now?

Yes. Well, because we have -- I don't think we have been great in this category to begin with. I'm not sure there is a lot of trade-down that I'm concerned about. Frankly, some of the new items we've put in front of the consumer, we've really focused on getting something affordable, something you can bring home for $3.99, $4.99, heat and eat, or already preheated. So that seems to have resonated.

As it relates to the whole restaurant side, it's very difficult for us to get that kind of data on marketplace like Michigan or southwest Michigan. But the national trends, even though it seems counterintuitive, what I am reading is restaurants are actually -- they are performing as well or most recently been better than food stores are on sales. So I think there may be that trading down in the restaurant segment that is helping them a bit with the share of stomach battle. But we are plugging away there, and I am pleased with the progress. I just think we've got a lot of upside there. More to go.

All right, thank you very much.

Mr. Eidson, at this time there are no further questions. I would like to turn the floor back over to you for closing comments.

Well, if there are no more questions, we will conclude the call. And on behalf of Dave and everyone here on the Spartan team, I thank you for joining our call today, and we look forward to discussing our third quarter results with you during our next conference call. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.